Is global procurement as a stand-alone area of practice and expertise dead? I would argue a resounding, “Yes.” Global procurement has become simply procurement, albeit with one key exception compared with regional supply chains: distance. Factoring distance into the procurement equation, by targeting the intersection of the traditional supply chain with sourcing and procurement areas, is more important than ever.
Here are 4 specific areas for examination as distance replaces global in international procurement and supply chain management:
- Lead times considerations for physical product. (See Part 2 of this series for greater detail here of this installment.)
- Lead time considerations to identify quality or other concerns. (For example, a container that takes 4 weeks to arrive from a supplier’s facility to your own takes 28 days more to identify potential issues if they have not been already flagged at the supplier, compared with local alternatives.)
- Supply chain network design, such as considering the added costs of creating optionality at different supply tiers to reduce risks or the need to carry additional inventory.
- Total cost modeling centered on cross-border logistics and trade, including tax, tariffs, duties, customs clearance, brokerage, offsets and others. Note that distance can matter less with certain variables in this area than trade or duty considerations between countries. (Although there are numerous ways to engineer different outcomes in this regard.)
Of course, there are aspects of global procurement in which distance plays less of a role than other elements, such as tax-optimized supply chains. But I believe the more practitioners think about global procurement simply as procurement – with distance as the variable factor in the supply-chain-meets-purchasing equation – the better. After all, in a connected world, a supplier is still a supplier, whether its closest facility is next door or halfway around the world.
As I conclude my analysis in the final installment of this series, I’ll share 3 distinct groups of technology that can be invaluable in the distance-based procurement equation.
(Cross-posted @ Spend Matters)